Design Accountability into Your Real Estate Business

Mike: This is the flipnerd.com Expert Real Estate Investing Show, the show for real estate investors whether you’re veteran or brand new, I’m your host Mike Hambright and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place.
This is episode number 358 and my guest for today’s show is Tom Cafarella, a Boston-based real estate investor. Today we talk about generating motivated seller leads, we talk about what’s working and we talk about what’s not. More than ever it’s critical that your adverting dollars are working for you every single day as every penny counts.
Today we talk about direct mail, online advertising and something that’s becoming more and more popular, actually cold calling seller prospects to see if they’re interested in selling their house. Whether you’re a brand new or a veteran, I promise you’re going to learn a lot from today’s show. So let’s go ahead and get started. Please help me welcome Tom Cafarella to the show. Tom, welcome to the show.
Tom: Thank you for having me on.
Mike: Yeah, I’m excited to talk about this and we talk about lead generation all the time but not always on the show. And I think you and I were talking before the show, we both know that it’s a different world now than it was 5, 6 years ago from a lead generation standpoint. I mean, you’d agree with that, right?
Tom: Absolutely. I was really lucky. I got started in the business about 10 years ago, literally probably the day the market started crashing. So when I first started, I thought real estate investing was you go on the MLS, you find a HUD owned property or a bank owned property, you put it under contract, you put some money into it and you make some money. And I did that for a while.
I did that for 5 or 6 years until somewhere around 2012, the market completely shifted. And it shifted overnight where there were 50 homes that were being auctioned or HUD properties like in the specific city I was doing a lot of business in. Overnight that went in half. And I went through a period where pretty much every deal I did, either lost money or I barely made anything, until I figured out that I needed to make a change. And that’s when I started marketing to sellers directly and my business completely changed once I figured that out.
Mike: Yeah. And so I have a lot of friends that were . . . now you’re in Boston and I am in Dallas, so REOs were never big here. They just were never a big thing, at least for me. I mean I bought like three or four HUD houses out of hundreds of properties three or four HUD properties and they were kind of flukes. They weren’t my best deals, like we always have been going direct to seller.
But I have friends that were buying at auction, like heavy, heavy at auction, REOs, lots of things. And for those people that never went direct to seller which has its challenges we’re going to talk about today, but you are a one-legged stool in a lot of regards and that went away for everybody at some point, no matter what your medicine was there, that went away at some point and people had to figure out a new way to operate.
Tom: Yeah, and at that point, my business got completely taken away from me. So I went from making really good money every single year to not knowing if I was going to be able to survive in that particular market.
Mike: Yeah, yeah. Well the thing about, once you figure how to go direct to seller which we’re going to talk a lot about today, we buy houses in distress, there is always people that defer maintenance on their house for decades and then eventually somebody has to deal with that and a lot of times the person that lived there for decades didn’t deal with it. So why would they deal with it all of a sudden after 30 or 40 years, right?
Those are likely investor type sales and there is always death, divorce, inheritance, lots of things that happen in people’s lives that are going to happen in all of our lives eventually. It’s just a matter of how our assets will be taken care of at that point. Will the family just say, I’m knocking on wood here, I don’t want anything to happen to my parents, but if something were to happen to my parents, I grew up in Illinois, I’m not going to go up there and fool with that. I just want it to go away tomorrow. So we provide a service for that, right?
Tom: Absolutely. And there are many other reasons, I mean you hit on the most common ones. But there are so many different reasons why it might make sense for a particular seller to sell to an investor and until you actually start marketing directly to motivated sellers, you don’t realize it.
Now, the majority of sellers, over 90% of sellers are always going to sell traditionally. They’re going to get their house ready for sale, they’re going to list it with a real estate agent, they’re going to want top dollar for their home, and they’re going to be willing to go through the hassles and headaches that a company having a property listed.
But that 10% of the population doesn’t want to deal with all that. They want to sell directly to an investor and they want to be done 30-45 days later without any hassles or contingencies. And those are the people that we serve. And so it’s the right option for those particular, that segment of the population.
Mike: Right, right, yeah. Well, before we kind of get any further, tell us a little bit more. You talked about how you changed gears and you kind of came into the understanding of the importance of generating leads yourself for motivated sellers. But give us a little bit more of an introduction to how you got started in the business and how you evolved.
Tom: Yes, so I got started in the business like I said, about 10 years ago and I was a CPA. So I had a full-time corporate job which I absolutely hated. So I would go to work every single day, I read about real estate investing, I daydreamed about doing fix and flips and buying holds and wholesaling.
And I got my real estate brokerage license. It wasn’t actually until I had a seller that did not want to list their home, but actually wanted to sell directly to an investor that I figured out that this subsegment of the market existed. And that was actually my first deal that I ever did. And I wholesaled that deal, did really well on it, and there was no looking back after that.
Mike: Yeah, yeah. It’s interesting about all real estate investors, a big part of success is just the confidence, right? And after you see it happen once, then you’re like, there is something in the back of your head that always wonders, is this really real. But once you see it happen, it’s like blood in the water and you hear shark. I’m all in now, right?
Tom: Even if you see everybody else doing it and even if you see a friend of yours that says they made a lot of money, it’s always in the back of your head, you’re like “Can I really do this? Does this really happen?” And most of the people that I talk with that are looking to get into this, they’re always like “Why would somebody take less than fair market value for their home?”
And I can list all the reasons but until you actually see it. It’s hard to believe that somebody . . . because we look at it from our perspective. Would we take a discount on our home? I probably wouldn’t. But again, there is that segment of the population that would and those are the people that it makes sense for us to serve and that’s how we make our living.
Mike: Yeah. I think a lot . . . people don’t really understand that there are definitely people that are not motivated by money or it’s not the primary motivator. Some people just want the pain to go. There could be pain associated . . . like a family member could have died and the house reminds them of them, you could’ve been abused as a child and that’s where your dad lived. Whatever, there are lots of reasons. I mean, there are a million reasons but sometimes people just want that problem to go away as fast as possible and it has nothing to do with money.
And I think until you kind of . . . until you have people explain their situation to you and tell you their story and you’re like “I understand.” Until you’ve experienced that yourself, people just don’t get it usually.
Tom: I have even had people where they just don’t want their neighbors to know they’re selling their house. As simple as that. And they don’t want people going through their house. They don’t want to have open houses. They don’t want the public to know that they’re selling and they’re willing to sell to an investor because of that.
So it doesn’t always even have to this extreme situation. It can be something simple that they just want a fast and easy sell and that’s all they need and that’s all we need and we get the deal done.
Mike: Awesome. So let’s talk a little bit about how things evolved from, let’s just go back even five years like 2011-2012, up until today. Because there has been a big shift in the market across the country. Every market is a little bit different but talk about, I guess the shift that occurred and maybe a little bit about the shift that occurred with you, like some of the things you realized and what forced you to change.
Tom: So what happened was is that when there became less distressed inventory on the market, they were the same amount of investors who wanted to flip homes. So simple supply and demand, the prices started getting pushed up and even as the economy started doing better, labor costs started to go up. So where we could buy a property directly on the MLS or at an auction and make money, we couldn’t anymore. And so again, my back was against the wall.
I needed to figure out a way for this to work. I didn’t want to go back to corporate America which was my biggest kind of fear and what motivated me. So we literally tested out pretty much every marketing method that you can think of. So if you go on BiggerPockets and you search motivated seller marketing methods, you’ll find 40, 50, 60 things. We were lucky because we had enough money to spend to test each and every one of them out. And then all we did was the ones that worked, we did more of and the things that didn’t work we did less of.
So we went through about a 6-month to a year phase where we tried a lot of things that didn’t work. And the thing about marketing to motivated sellers is that it can even be specific to your geographic location. Certain things can work in one market and they might not work in another. For example, in my market in the Boston market, if you put up a bandit sign, it’s going to get ripped down within an hour. So it doesn’t work in Boston. But I talk to people all over the country in different markets and in some markets you can put a bandit sign up and it stays up for a year.
So even within a specific geographic market, certain things might work better than others. But in general, there is only a few things that work really well across all markets.
Mike: Yeah. So what are some of the things you tried there that, other than maybe bandit signs, that just didn’t work for you? You sounds like you tried a lot, but try the ones that you kind of knew in your mind this is going to work and then just didn’t work.
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This is going to work and then it didn’t work.
Tom: So the bandit signs was a big one because I feel like every single course I ever took to learn about real estate investing, taught about how great bandit signs were. So we developed a really good system where we had multiple people putting them up, myself included, we would get up at 4:00 in the morning, get them all out. And again they were just getting ripped down and ripped down and ripped down. And not that we didn’t get any leads from it, but when you actually calculate out the cost per lead, it was extremely high. So our cost per lead on the bandit signs ended up being about $1,000 per lead, which you really just can’t make money on. So that was one of the things that didn’t really work well.
The other things that we tried that don’t work super well is, I’m pretty anti-driving for dollars. So I did a lot of driving for dollars and what I found after doing it a lot is that I’ve never seen much of a correlation between somebody who has a property that’s in beat up condition versus somebody that actually wants to sell to an investor. And driving for dollars takes up so much time.
You’re basically doing all this research to get somebody who you then can contact when you can just start out by contacting them. And so I think in the beginning now is a mistake I made a lot of where it was like I was going to cold call somebody, I spent an hour of research before I identified who I was going to call. Whereas today I’m broadcasting out thousands and thousands of calls and yes, some of those people aren’t going to want to sell, but I don’t care. I want to get out as many calls as I can instead of doing the research up front.
Mike: Right, right. And there is different approaches to driving for dollars, I know having some friends in Boston as well. I think somebody said before that door knocking would be like a huge no-no in Boston compared to maybe other markets. I mean people are . . . sometimes people tolerate things different in different markets.
I’d say in the south people are little more to like knock on the door, how are you doing, come in, and have some ice tea and talk to me. I don’t even know what you want. And then as you could imagine in the northeast people are little bit more like short. Like “What do you want?” Maybe, I don’t know, I am making this up, but probably less . . .
Tom: You’re right. But door knocking works. The problem with door knocking is that most people won’t do it. So it’s one of those marketing methods where like the only time I had been successful with it is when I was the person who door knocked. And me as the business owner I don’t really have time to door knock.
So I actually went through a phase where I hired a bunch of people to actually do the door knocking for me and I gave them a route and I gave them a map and we had a tracking system to see if they actually knocked on the door, like I would have them take a picture of something they would believe behind. But the issue is that in the Boston market, and this is probably true everywhere, but in the Boston market specifically when the snowstorms start coming, people don’t want to be outside walking around anymore.
So it became a job, the door knocking itself, for it to be profitable for me, I couldn’t pay a lot per hour. But people weren’t willing to do the work for that low of a cost. So again, door knocking definitely works but it’s not something that I really suggest for most people to do because it’s a hard thing to kind of expand out on a bigger level.
Mike: Right. So what are you doing now, Tom, that does work? What are some of the things that you’re doing that you want to share today that are working for you?
Tom: So the three things that work really well that I think work across all markets and then anyone could implement very easily, would be cold calling, internet marketing, and mailing. With mailing being my least favorite of the three as of today because mailing is the most common and it’s the lazy person’s way of marketing, so it’s the most saturated.
Mike: Yeah. We have this discussion all time with people that I coach and mentor, is that even when you’re mailing the more broad or cheap, because sometimes people want cheap and easy when you start in real estate investing, so people say well just go after the absentee owners with high equity. It’s like, okay. Well that’s a huge list but those lists may cost you 3 to 5, may be 7 to 10 cents depending on where you are buying it from. But if you get some specialty list, those might be 40-50 cents a record.
So I think basically the more expensive the list is to get to or the harder it is to get to, the less competition you have because the competition and the gurus out there and everything, they’re teaching the cheap stuff, like “Oh just go get the 2 cent a record list.” It’s like “Yeah, but that’s just crap.” But yeah, there is no doubt that the stuff that’s harder to do and the stuff that’s more expensive to do, you tend to do better over time because you got less competition there.
Tom: Exactly. So what we actually do is the most expensive of all which is build our own database. So we have certain variables that . . . we have a property profile that we like. So we know what types of properties will make us the most money. And we have the seller profile that we like.
So just to give you an example on the seller profile. We know that on average most sellers are going to be over the age of 50 that sell to an investor. Now that doesn’t mean that someone under the age of 50 can’t sell to an investor, but again, when we’re targeting we want to make sure that we’re marketing to the people that are most likely to sell to us. And we want to market to the people, to the homes that we want to buy.
So if you target for example, just an absentee owner list, well, you’re going to be mailing or calling or putting ads up in front of people whose houses you probably don’t even want to buy. So we go the reverse way. We say what houses do we want to buy, what’s the demographic information of the people that are going to sell to us and let’s market to those people over and over and over again until they either sell to us or they sell to somebody else. And that’s the method that we use. It’s the most expensive but it’s the biggest ROI overall.
Mike: Right, right. From a criteria, not that you have to give us your detailed criteria, but over the age of 50 you’re looking for houses that are clearly not new. You’re looking for houses that are older that had a chance to become distressed, I assume.
Tom: Exactly. So in Boston, the average property was built between 1880 and 1920 which is older than . . . Boston is an old town. So anything built after 1960 is kind of new for Boston. So we are not marketing to any houses that are built after 1960. So we’re looking at things like assess values too. Because I like to be in the median to lower end of every market because I feel that’s the most amount of buyers.
And so for each kind of filter that we put on, it takes out a certain amount of the population. And then we have a database in the Boston market of essentially every house that we want to buy. And those are the people that we’re continuing to market to, like I said. They’re either going to sell to us at some point or they’re going to sell to somebody else, but we’re going to be front of them when they are going to make that decision.
Mike: Yeah, yeah. That’s awesome. So let’s dive into . . . so we kind of went over the criteria, I guess these are criteria used for mailing, but let’s start with what you said your favorite was which is something that’s becoming more and more popular these days, we hear more people talk about it, is cold calling. Actually cold calling prospective sellers, really they’re home owners that you’re trying to find out would they be interested in selling, right? So share some more about that.
Tom: So it’s the same database. So when I say that we’re reaching out to them and we’re in front of them forever, we’re in front of them via calling, via mailing, and on the internet, on Facebook and Google until they end up selling to us or selling to somebody else. So when we call, the person has also received letters from us, the person is also seeing us on Facebook and also maybe seen us on Google if they’re searching for the right key terms. So we’re calling to same people.
But the important thing about . . . there are a couple of important things when it comes to calling. The first is essentially how you kind of go up the ladder which meaning like you’re having . . . the person that you’re paying the least amount of money doing the lowest level priority task and then as you need more skills, you’re going up the ladder. So for example, the people that are doing my initial calling, they’re the lowest dollar per hour. And then all their job is at the very beginning stages of us cold calling is to call as many people as possible and just to identify if the person might consider an offer.
Once they say yes I might consider an offer, then it goes up the ladder to somebody else who has more skills. And so that person is an inside sales agent for me that can have a more in-depth conversation on what we do, what we offer, what types of houses we like to buy, how it might be beneficial to them. And then once the inside sales agent has that conversation and the seller is willing is meet with us, now it’s going to an acquisition specialist on my team who can go out there and meet them and actually get the deal closed.
Mike: Okay. So from that initial call, are they mentioning in any way that you’re a discount buyer or they’re just seeing if they’re interested in selling at all?
Tom: They’re just interested in selling and the reason for that is because I have a 150 person real estate brokerage, so a lot of the people that are acquisition specialists on my team are also agents.
Mike: I see.
Tom: And so we can help to sell . . . if they want to sell, we can help them. And when we go out there we’re going to usually help them make the determination of whether or not it makes sense to sell to an investor or whether it makes sense to sell traditionally.
And for most people, it makes sense to sell traditionally and that’s okay. We want to do what’s in the best interest of that particular seller. We help them kind of determine what that is and then hopefully if we do a good job of providing value, they’ll end up working with us.
Mike: That’s awesome. So can you maybe share a little bit about how you build your database? So you start with addresses, I guess, some criteria, so you’re pulling this from public records probably initially and then you have to append stuff to it? Okay.
Tom: Correct. Exactly. So there is a lot of appending. So we start out with, we go into our MLS database, the public record, and then we export the initial set of records, and then we just keep on appending to that . . . we filter. There is some stuff that you can filter in the MLS and there is some stuff you can’t. So we filter as much as we can right out of the gate in the MLS, but then we add other filters to it which we do outside of the MLS. And then when you’re talking about appending data, like we’re appending email records, cell phone records, and any other data that we need to know about the person, like date of birth and anything like that.
Mike: Yeah. That’s interesting. So that’s how you . . . let’s kind of get into the next set, which is online advertising and I know before this, you said you liked Facebook. So the question I always have with Facebook because we do a lot of marketing for FlipNerd and for our business and stuff, we don’t advertise for sellers right now on Facebook other than retargeting, which is kind of a logical step, “Hey they visited my site. They’ve expressed some interest, so we’re retargeting them.”
The challenge I would say typically on Facebook is that, unlike Google where somebody is searching for keywords, they’re looking for you maybe, but on Facebook it’s hard to know that “Hey, my mom just died last week,” by the way, mom if you’re watching this, I’m not talking about you. Basically, “Mom just died last week and Dad’s in a nursing home and I’m motivated.” That stuff doesn’t come up on Facebook but I know that you can target people based on IP address, based on their address. Are you using that information to upload and target IPs based on the houses that are in your database that you’ve already decided you want to buy?
Tom: No, we’re not. I know exactly what you’re saying and I don’t even think what you’re talking about doing would be possible. So on Facebook, the negative of Facebook is that you’re basically interrupting someone doing something else. So with Google the benefit is, they go on Google, they type “sell my house fast, Boston,” they’re looking for you. So that is a higher quality, more expensive lead. On Facebook they’re basically looking to see pictures of their friends and their family and you’re throwing up an ad in front of them that’s saying, “Hey, you want to sell your house fast in 7 days? Click here.”
But even though the leads are not quite as high quality, you’re going to get a lot more for your dollar. So when we look at leads in general, we look at the cost per acquisition. So I don’t care really about the cost per lead because I can get $10 home valuation leads, but they’re all garbage. So I need thousands and thousands of home valuation leads in order to buy a house.
And then on Google when somebody goes in and they say, “Sell my house fast or sell my house fast for cash,” those leads are super expensive but they’re really good leads. So we look and say “Okay, how many Facebook leads does it take to get a deal and am I profitable on that spend?”
So if I’m spending $5,000 or $6,000 or $7,000 or $8,000 on Facebook ads, what’s my ROI and as long as my ROI is positive and it’s comparable to my other lead sources, then we’re going to go after it. So on Facebook you are able to filter. So Facebook knows everything about you. How old you are, they know your marital status, they know your job, they know what you like, they know what you don’t like.
So the cool thing about Facebook is if you’re a real estate investor, you’re not seeing my ad. If you’re a real estate agent, you’re not seeing my ad. If you’re not a home owner, you’re not seeing my ad. So Facebook does have a lot of information about people where you can get pretty targeted. Now, you are going to reach some people on Facebook that maybe you don’t want to buy their house, but again the cost per lead is lower. So it’s a good value.
Mike: Sure, sure. I see, I see. Awesome. So you’re not targeting . . . because you can also upload email addresses and target people that way and you said you try to append email addresses. So there are some other . . . which are not perfect, I mean, but I think, who knows where Facebook will be even two years from now or what other social network will pop up.
Tom: I saw some funny marketing cartoon where . . . I’m not going to do a good idea of explaining it, but it’s getting to the point where all the ads that we see on a day-to-day basis now are so targeted specifically to us because these companies know so much about us now. So in the future, we’re going to see ads that are literally talking specifically to us. Like “Hey, Tom in Boston,” and it’s getting to that point where everything that we see now is so targeted. And it’s nice from an advertiser’s perspective because you can put the right ad in front of the right person.
Going back 10 years, if you wanted to do a TV ad, you’re putting a message out in front of a bunch of people who you know they have no interest in your product or service, but you still have to pay to reach all those people. Where now, you can get super targeted and you can only show the ad to the people who are your most motivated clientele and only pay to show it in front of those people.
Mike: Right, right. So with online . . . so you’re primarily doing, I guess you’re doing both Google, you put AdWords and Facebook advertisements, is that primarily what you’re doing?
Tom: Yeah, and some SEO but I always hesitate to say too much about SEO because most people think when they get a website and start generating SEO leads in a month or two months and the reality is it just takes a long time. And even once the SEO starts working, someone can bump you like a position or two down and you don’t have all that much control over it.
So we do get a bunch of SEO leads but when someone is first starting out, I’m like don’t even think about SEO because you’re maybe a year away from generating your first lead.
Mike: Yeah, yeah, for sure. And then by the way, even if you become proficient at SEO, Google could change their algorithm and you just . . .
Tom: That’s what I’m saying, you have no control.
Mike: Next week everything goes away. There is one thing for certain, is there will always be a way to spend advertising dollars to advertise and you will always have more control over what that gets you ultimately. So I guess even nobody likes to pay for advertising. It’s like at least it’s predictable, not completely predictable but more predictable.
Tom: But I like to spend money on marketing because at the end of the day it’s the easiest way to leverage yourself. So when you try to do stuff to generate leads, spending your own time, I mean your time is the only resource that you don’t get back. So as long as you’re getting . . . if I’m spending marketing money and I’m giving you $1 and you’re giving me $2 back, I’m going to keep spending that dollar until I can’t get that $2 back anymore.
Mike: Yeah. We’re kind of coming up at the end of our show here. What advice do you give to people that are looking to get started or that are already started in real estate investing but they haven’t really cracked the code on advertising? Where do they start? Because I know we talked about direct mail is where most people start, the cold calling thing is not complicated, but it’s a process that you have to learn, and then direct mail is becoming easier than it has been in the past, but there is still a learning curve there as well. Where would you suggest people start?
Tom: If you don’t have any money, I would suggest starting with cold calling because you can do that for almost nothing. The Mojo dialer which is a three-line dialer is 150 bucks a month. If you’re going to pay, I would start with either Facebook or Google and start with a marketing budget that you can afford and then scale up from there.
But I would always recommend if you’re an investor, get your real estate license because most of the people that say that they’re motivated to sell are still going to sell traditionally. So why not capitalize on that lead regardless of how they’re going to sell. So I always recommend to get your real estate license as soon as you can in the beginning and you’ll get a bigger ROI on everything that you do in real estate.
Mike: Yeah, yeah, awesome. And Tom, if folks want to learn more about you, about some of the stuff you’re working on, where would they go to find you?
Tom: The best way is just to go to my website directly which is www.realestateinvestingiseasy.com. Again, that’s www.realestateinvestingiseasy.com, and that actually has my best training video which kind of goes over in more detail some of the stuff that we’ve talked about today.
Mike: Okay, awesome. We will have a link down below the video for anybody that’s interested and thanks for spending the time with us today.
Tom: Yeah, it was good.
Mike: Good stuff. I think the important thing is if you’re listening to this and if you got overwhelmed, the intent is not to overwhelm you, but the key really, is to get started. So you don’t have to start with all these things and like Tom said if you don’t have a lot of money, you can start with cold calling and just dialing people. You can start with direct mail with a relatively low budget. And you can start online. I mean, online is easier to do. I’m not a big advocate of people that have no knowledge there going to start to figure that out themselves. But there are some easy ways to kind of get started on a low budget online as well. Awesome.
Well, everybody thanks for joining us today. This is episode number 358 and we’re going to keep our episodes rolling out here. By the way, if you haven’t listened to our other podcast REI Classroom, I think over 700 episodes of that show, so we’ve got over a thousand episodes of different shows already for you on flipnerd.com or in the iTunes store. Everybody, thanks for joining us and we will see you again next week. Take care.
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Mike: Hey, everyone. It’s Mike Hambright with FlipNerd.com. Thanks for joining us for this episode of the Expert Interview Show, where I interview awesome leaders and entrepreneurs from across the real estate investing industry.
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But today, I’m with my friend, Frank Curtin. This is episode number 293 of the Expert Interview Show. Frank is a business automation expert. I’m in tune with a lot of experts in the real estate investing space and this year it’s all about scale. How do I scale? How do I automate my business? How do I get myself more out of it? Which is what we all want.
Many of us left a J-O-B to achieve financial freedom. But a lot of us simply end up becoming a slave to our own business and really have another job that we’re chained to, unfortunately. So what Frank is going to do today is he is going to share some actionable steps to design accountability in your business so you could really lay out what are the components of my business and then you can layer in people that might be able to help you and start to make sense of it so you can achieve some of that freedom that you’re after. So we’re going to dive in and, ultimately, these are some things that can help your business thrive. So I’m excited to be here. Frank, how are you today, my friend?
Frank: I am awesome. Thanks for having me, Mike.
Mike: Great. It’s interesting how, over time, businesses are talking about certain topics. It’s like these trends of what’s popular this year. There are a lot of people that are trying to scale. That’s not really a trend or a fad. Everybody wants that. But I think it’s maybe a symbol of or a sign of real estate investing kind of coming into the mainstream as an actual business instead of a hobby or something that somebody is kind of fooling around with. So why don’t you talk a little bit maybe take a couple of minutes to introduce yourself and talk about what you do and then we’ll dive into the topic of the day.
Frank: Great. Well, first off, I’m an alumnus here with you.
Mike: Yeah, welcome back.
Frank: This is not my first show with you. So thank you. I appreciate you having me on again. I am a business systems expert. I like to implement business operating systems within small businesses. So I work with a lot of real estate companies, dental practitioners or professional service-type companies and I help bring discipline to chaos.
So we all know what controlled chaos is, right? It’s what we typically do. That’s our 9:00 to 5:00 thing that we tend to get ourselves involved in as entrepreneurs. With a few key, simple tweaks to the way people operate their business, I think that they can gain a lot of control over some of the things that give them some of the headaches or the sleepless nights or stuff like that, definitely from that perspective.
So as a business expert, my job is to work with people to make sure that they fully understand the potential of the dream that they conceived called their business and how to bring people in effectively, how to make people accountable and how to make themselves accountable and things of that nature. That would be the topic of today.
Mike: It’s interesting. I know you work in the dental space with doctors and other small businesses. My gut tells me that real estate investing has the potential to have a lot more drama than other areas because they may have business hours. They effectively open and close at certain times where real estate investors are kind of on 24/7, especially if you own rental properties where something could go wrong at 2:00 a.m. So I guess what I’m saying is there’s more opportunity for real estate investors than maybe even other businesses to use the information you’re going to share with us today.
Frank: Without a doubt. First and foremost, we know that revenue off of the type of business that real estate produces, contracts, you can have one this month. You can have six in another month. You could have none for a period of time. The way the revenue comes in is so sporadic and it’s not very predictable, unlike if I’m in a retail store and I’m selling widgets, every day that I’m open, I’ve got foot traffic coming in and buying stuff. So I get revenue every day that helps me with my daily expenses. In real estate, it’s even more important that we’re aware when that revenue is coming because generally speaking, we’ve got some expenses going out.
So we have to have either a reserve built up for that or we have to have something in place to help us overcome that and keep the disciplines in place that can go crazy. You’ve been in real estate a long time, Mike, and you know sometimes contracts go sideways. Paperwork is not found. People are struggling to find all the pieces and get everything made correctly.
So when you think about all the little pieces it takes to make a deal actually happen from the time you find a deal all the way through getting that HUD statement signed off, closed and checks wired into banks and all that kind of stuff, from that thing, there are a lot of moving parts. For many of your listeners, they’re solopreneurs. They’re doing this by themselves. If they drop the ball anywhere on the line, that’s money they’ll never see.
Mike: Yeah. I think for those of you that are listening, a lot of you that are solopreneurs that are running a small business, if you’re listening with us here today, this is going to be relevant to you as well. So don’t think that if you have a small business and it’s just you that this stuff isn’t important because your intention is to grow. If that’s not your intention, then maybe this isn’t relevant. I think most of us that get into this business are looking to do it for financial reasons, lifestyle reasons, things like that. Some of the stuff that Frank is going to talk about here is going to be a unique way to design your operation and how to think about things differently.
Frank, let’s kind of get started. In part one of the show here, we’re going to talk about the fundamentals. Then when we get into part two, the taking action segment, we’re going to get into a lot more detail about how to actually structure things. So if we want to talk about the fundamentals, let’s go ahead and dive in.
Frank: All right. So basically, like we said, today’s topic is all about accountability. One of the biggest things that people do when they first start their own business is they wear the hats of every single role that exists in their business. Maybe they have a partner and they split up roles and stuff like that.
I would venture to say that the person who’s doing it by themselves probably has more control than the person that has a partner because when we have partners, we tend to share roles and responsibilities with each other. So one of the big challenges with that is who’s going to do what? Where are we stepping on each other? Where do we have crossover and stuff?
So from that perspective, accountability is all about making sure that of all the roles you have in the business, somebody, one person, is accountable for it. Again, as a solopreneur, that would be you. You’re accountable for each and every piece along the way unless you start to get help.
So from a structuring perspective, most people build an org chart and you’ll see the joke that’s typically put out about a solopreneur. It will have all these little boxes and it will say, “You, you, you, you, you
” The joke is you’re everything. Okay. So be it. But as you start to grow, some of your listeners, they have bigger companies, they have more people on your staff, your name is not in all those boxes anymore. What my challenge to you is can you take that org chart, kind of toss it to the side and can you create what we call an accountability chart?
What an accountability chart does is it says, “Forget people for the moment.” Every business has a certain set of things required for it to make money. So whether we’re in the flip business, whether we’re in the rehab business, whether we’re in the rental property business, whatever kind of business, I don’t care if you’re a hair salon, whatever you’re in, there are certain things you need.
So at the basis for all organization, there are three things that every company has in common, whether you’re Ford Automotive or you’re a FlipNerd show host, it doesn’t matter. We all have three things in common. We have three functions. It’s called sales and marketing. The second one is operations. The third one is finance.
Why is that relevant? Well, we all have to market something. We have to have some sort of way to get our word out that we have something for sale, whether it’s a service or product. Then, we have an operations component that’s all about, “Hey, from operations, we all either provide a product to the marketplace or we provide a service to the marketplace.” Either way.
Then, the finance component is we all have money come in and out of our organization. Without good controls on all of that, that leads to a lot of challenges that a lot of organizations end up with when they don’t view it from that perspective.
So if I were to build an org chart for an entrepreneur or a solopreneur, the org chart would probably be just themselves. They wouldn’t have anything because they would say, “I am the operator/owner. I’m the president. I’m the CEO.” And you’ll see a card like that. That is their org chart.
My advice to them is to build the organization the way it actually operates, which is accountability rather than that. So you look at your marketing in sales. Then you look at your operations. Then you look at your finance. You determine what seats need to exist for you to market the products that you offer, to transact for selling whatever else you have to sell, to build or make what you have to provide and to account for the money that has to flow in and out. So you can pay your bills on time, pay your people and get paid yourself. All of that stuff.
Look at it from that perspective and you can’t help but see the obvious things, like when it’s time to grow, where do I need help? You start to see the places that you’re really good at, you’re fairly good at and you’re not good at it at all.
Mike: Frank, I think the other thing that’s probably common with small business is if they have an admin or they have a couple of people on their team is that their org chart is all about the names and who reports to who. And then, kind of below it, it’s, “She does bookkeeping and she also answers the phones.” You’re not really focused on the things that have to happen in your business. You’re focused on what did I throw on them versus what has happened in my business.
Frank: That’s exactly right. If you think about business from any perspective, it’s not what the people do, it’s what the business needs to get to get done.
Mike: Right. And I would say, Frank, even personally, I’ve had those problems where we’ve done . . . I’m my own victim of what we’re talking about here. I have a person and over time, it’s like, “I need to do that. You’ve got certain capacity so you can also do this.” The problem is if that person leaves or they move on or you move them on or whatever might happen, now you’re like, “I need somebody that can do all the things that person can do.”
A lot of the things they ended up doing are based on their skillset, which is probably unique to them. Then you start refiguring it based on what you think the people can do in your business instead of what needs to be done.
Frank: Right. More often than not, people hire somebody because they think they need help. All they’re doing is they’re reaching for somebody that has at least this baseline. They think, “They’ve got to be able to do QuickBooks because I’m not doing that. They’ve got to be able to do that.”
They find someone that can do QuickBooks and then they look, “What other things can I have them do for me,” rather than looking at what the business needs, “I need somebody to do my bookkeeping. Yes, I do. I need the financial reporting off of that so I know how things are moving along.” But maybe there are some other seats in there that this person would also be able to sit in, but you’d be able to identify it right away.
With an accountability chart, people can come into those seats when you need them to go into those seats. It also helps you with your training too because if you think about it from this perspective, if I’m going to document some things so that I can delegate it to somebody else to do, if I’m going to document a few of the things that I’m not a real fan of and I want someone else to do those tasks, I get that documented and I know what needs to be documented because I have the seat created.
The seat is going to dictate what processes they’re going to do, which tells me what I need to get documented to hire for that seat. So it gives you a lot of the clarity that most entrepreneurs struggle with. They get frustrated with, “All right. I know I’m supposed to do all this process documentation so I can bring people in. I know I’m supposed to bring people in to get me help. I know I’m not supposed to do everything.”
Okay. So how do you start? My advice is you start with an accountability chart. That is the first structural thing that you would do to your organization. That’s going to lead to where you need your help, what processes you need to do so you can train people properly, bring them in and out of the organization, all that stuff. It’s the first step for an entrepreneur’s path to growth. I like to call it your first step to sanity because it’s going to provide more peace. And the lines of communication get really clear because when you know where work has to happen in your business, not anyone else’s, yours.
What’s interesting, I’ve worked with a lot of real estate professionals, two wholesalers do not necessarily have the same structure. They don’t operate that way. It’s the way you operate. That accountability chart needs to reflect your way of doing business, just like I have one that reflects how I do business.
Mike: Frank, when you start to assign people to those seats that need to happen, I think what starts to happen is some people in, I guess, certainly in large organizations this happens is they start to do this land grab of “let me take on more responsibility.” In small organizations, I guess that accountability chart will help you with your roadmap to growth.
So you might say, “Hey, this is your main job, but I also need you to cover this seat. We can’t afford to hire another person,” let’s say. Do you think it makes sense to tell the people that are in those seats of, “This is your primary and this is your secondary role. If we get to the point to where we need somebody to have that as their primary role, then we’re going to move it back off your plate so people don’t think you’re taking something away from me”?
Frank: Absolutely. In fact, what you should say is, “I really need you to do this.” The way we kind of work within an organization is once you build out an accountability chart, we want to have anybody that’s working for us do what we call delegate and elevate. That’s a grid, if you will.
Everything above the line . . . imagine four quadrants. The top two quadrants, those are the things you’re good at or you’re great at. “I’m really good at this role. I’m really great at this role.” And you like and/or love doing those things.
Below the grid are the things you’re good at and you’re not good at. You list all the roles there. These are the things you don’t like to do. If you want to find your unique ability, you start delegating all the things below the line and you take on all the things there.
If you read Jim Collins’ “Good to Great” and you talk about unique ability and things like that, that above the line stuff, that’s what true, unique ability is. It’s not some euphoric state of utopia thing that you define for yourself, like “My perfect job is . . . ” and you start filling out this form and then you go create that company around that job. Your perfect job is doing things you love and like to do.
When you do that, it can be in any business. It can be in the one you have now. So whatever you’re doing, as long as you can identify the things you love and like to do and you can offload the things you don’t like to do, you’re in your unique ability. Mondays are not a bad day anymore. Mondays are happy.
Mike: Hey, Frank, before we get too far, we should have mentioned this upfront, but a lot of your consulting and your practice is around the EOS system and a book “Traction” that a lot of people have read and if you haven’t, we’d like to advise you. You want to take just 30 seconds here and kind of talk about at a high level what that is?
Frank: Absolutely. “Traction” is a book that was written by Gino Wickman, a brilliant entrepreneur who at a very young age learned some of these principles through discovery, not through theory. So this is not your college professor. I have an MBA. I had a lot of professors who taught me business tactics and skills. I got the majority of what I know doing it, not reading about it in books.
What Gino did is he put together a book that has basically six key components. So at a very high level, when you’re strong in all six of those components . . . so there’s vision. It’s very important of every company to have vision, even as a solopreneur, it’s important to have a vision so you know where you’re going.
Then people and data, people is all about right people, right seats. That’s yourself plus anyone else you add to the business over time. Data is about having a metric for all those seats. How are you doing? Every person can have a number or every seat can have a number that represents its contribution to the organization’s flow of work. How are they doing? Then there are issues. When you have solid vision, good data and good people, the barriers and obstacles that get in the way, they stand out. They really stand out.
The fifth one is an important one called core processes. Every company has six to 10 core processes. These are the things that make up 80% of your daily activities. They’re only 20% of your processes, but they make up 80% of the work you do. Does that make sense? We want to get those documented because remember we talked about the accountability chart, which is all part of the people part, knowing where people get put in. It’s kind of like an important component to the people chart, so we know why we have those people here in the first place. The processes allow us to bring people in and properly get them trained so that they keep delivering consistent results that we want to have.
And then, lastly, is what we call traction, which is the title of the book. You have vision on the top, traction in the middle. Traction is all about having regular meetings and a meeting pulse implemented, people having rocks, which are 90-day sprints. So the whole concept of the book for EOS is an entrepreneur operating system for small businesses, generally anyone from 2 to 250, maybe up to 500 people in their company and it’s phenomenal.
It really provides an organization with the discipline they need to break through any barrier that they come upon, whether it’s an individual one, departmental one or a company barrier. It allows you to break through that because you now have the visibility into what’s stopping you, whereas a lot of people are just, “I don’t know what’s wrong. I don’t know why we’re plateauing here and here and we’re stuck. Why?”
Mike: It’s interesting. I read the book when it first came up and I started to hear of it more and more at a mastermind that I’m in maybe six months ago or so. I grabbed the book and I read it on the plane home. I’m what the book would call a visionary. So the idea guy, not necessarily the one that needs to be doing all the work. Unfortunately, when you’re a small business, you still have to do work.
But I was showing my wife, I was like, “See, this is me. This is me. You never understood me, but here I am.” It’s a great book. We’ll definitely add a link for “Traction” like on amazon down below, but if you haven’t read the book, for those of you listening, it’s a great book and it will help you get a little bit different vision on your business and some of the things you need to do to be successful.
Okay, Frank, we’re going to jump into the taking action portion of the show. Are you ready to show us the way, my friend?
Frank: Absolutely.
Mike: Awesome. So we’ve kind of built a foundation here for how you can start to understand who needs to be accountable for what in their business. Even before I read “Traction,” I picked up on little things in my corporate life over time and I really started to pick up over time the difference between responsibility and accountability.
So I’ve always tried to install that in whomever I work with and say, “You’re accountable for this.” You don’t necessarily have to do it, but you’re accountable for it. So if you delegate that to somebody else, you’re the person I’m going to come to, but it doesn’t mean that there’s not somebody else involved. Does that kind of follow the same trend in the “Traction” EOS process?
Frank: Absolutely. In fact, that’s probably one of the key takeaways for folks. Just because you’re accountable for something to get done doesn’t mean you’re the one that has to do the thing that gets done. However, if that thing doesn’t get done, all eyes come to you. So that’s the difference.
So as a good leader or a good manager, when you start having people below you, if you’re accountable to have something done and you’ve got a team of people helping you or maybe even just one person helping you with that item, it’s up to you to manage them appropriately to help them and give them everything they need to get that done for you. Does that make sense?
Mike: Yeah. Absolutely. One of the other . . . I don’t want to steal your thunder because I want to dive into this. One of the things I picked up in the process of talking to you is having other people . . . I feel like as the business owner, I was always the one creating scorecards and trying to measure things. People on my team were never really involved.
I could say, “Here’s what happened. Here’s what didn’t happen,” but never really forcing them to take accountability for, “You bring me the metrics. You put the metrics in our scoreboard. Therefore, when I ask you about them, you’re going to know there’s a problem or you’re going to know things are good because you’re the one that put them in there.” It just kind of forces anybody that’s on your team to really ultimately take more accountability, right?
Frank: Without a doubt. If I’m accountable for an area and I assign a metric to that performance of that area, so if I’m in marketing and let’s say ROI might be one of my things. But it might also be leads. We like to use predictive measures rather than trailing ones. But let’s say number of leads in a week that are generated from the department that I’m responsible for called marketing, where lead gen falls under that. If I’m responsible for leads and I’m supposed to get 100 a week and I fall short of that, it comes up as an issue.
So now that’s something to talk about. It’s like, “What happened?” Now we can start having a healthy conversation about why we didn’t achieve that level of leads we didn’t do. What activities took place? Did we lower our spend? Was it a short week? What happened that this didn’t meet its need?
Now, the person accountable for it is the one that has to answer. Why? They’re the ones that were accountable for it. So they should be knowing and understanding everything going on in that group. If I’m a solopreneur and I’m doing this for myself, of course, you’re going to know because as you’re tracking this stuff, you’re going to start seeing it. You’re the only conversation.
I would advise you, though, that even if you’re a solopreneur doing that, get with other solopreneurs and meet regularly about the issues you’re having. You need to bounce your ideas off of people. So there’s nothing wrong with doing that. Your local REIA clubs will do something like that. You find someone to hook up with.
Mike: You can form your own meetup group if you need to.
Frank: Yeah. Come up with your own little think tank, your little board of advisors, if you will. Everybody needs the benefit of an outside influence on their thing, provided that person is mentally stable, capable of delivering that sort of thing. You definitely want to trust the person. That’s why we call them trusted advisors. You want to trust them but, at the same time, if you’re doing it alone, that’s a toughie. That’s a real tough one for you.
Mike: Yeah. Let me try to give, I think, a practical example here. Let’s just say wholesalers or traditional real estate investors and chime in or tell me if I’m wrong here, Frank. Not everybody is split up this way, but if you think of your business as you generate leads, you buy houses and then you sell them, if you have metrics around leads, around acquisitions and then around sales or dispositions and if you had three people doing that and a lot of small businesses are like, “We didn’t sell anything this week. How come we haven’t sold anything this week?”
And the salesperson says, “We haven’t bought enough.” And the buyer says, the acquisition person, “We haven’t been getting enough leads. I haven’t been going on enough appointments. If you can imagine that pipeline of the funnel of the business there, if you can identify, “We’re supposed to sell one house a week. But in order to do that, we need to buy two and in order to do that, we need to get 50 leads or 100 leads,” or whatever the number is to be able to measure those metrics. And if you have a weekly team meeting, talk to your team and say, “Leads are down.” You would know there’s going to be a sales problem before there are no sales and just identify those issues.
Frank: You’re very close on what you do. I would use even more predictive nature, more leading indicators versus trailing. A sale is the buck stops here. That’s the end game. But prior to a sale, you’d have appointments. So my sales team, I would want to know weekly how many appointments are you holding. Knowing if I run five appointments and I get one sale and I only ran three appointments, it’s highly unlikely I got a sale. Does that make sense?
We know that in real estate, closings, I could get three in one week and nothing for four weeks or four months because of that. So I’m looking for things, “What activity can I monitor weekly?” Appointments, leads, things like that that I can keep the ball rolling on that, I may not transact because the sales cycle is much longer in real estate and you’re not coming into my front door and I’m not selling you milk or cheese or dairy products or stuff like that where it’s on the spot type of purchases.
So given that, you’ve got your marketing, you’ve got your acquisitions and your sales. Acquisitions, they have to be buying things, but also, for them to buy, they have to be doing due diligence and conducting appointments and whatever it is they do depending on where they get their leads from. I know some firms, they like to get their leads from REO places. So they’ve got good relationships with banks and they’re looking to take down some inventory from the banks. That’s fine. Now it’s how many properties did I review? How many deals did I analyze? You’re getting into the predictive nature.
Every day, I have things I could be working on. As a sales person, I can be on appointments over and over and over again. Once I get the contract, I hand it off to a closing coordinator and I let them do all their stuff, unless I’m an entrepreneur or a solopreneur, and I do everything. Then, I get involved in that process. Once I get the contract, I had it off to a closing coordinator and I let them do all their stuff. Unless I’m an entrepreneur or a solopreneur and I do everything.
Then I get involved in that process. But what that accountability chart does, from an actions perspective, it lets you see where you are at, at any point in time. It also helps you to keep your eye on the ball. If I have a metric for each one of those, even if it’s all me, I can’t just drop everything and go do this one thing because I had this whole thing to build. So now time management comes into play and I start to become more aware of where I spend my time and why I’m not getting here I am. Does that make sense?
Mike: Absolutely. Yeah. I think where a lot of real estate investors fail is you know a lot of bigger operators and I know a lot of them too is that they get to that scale point. The problem with a lot of small real estate investors is when you do it all, it’s how do you get out of that vicious of cycle of just repeating it over and over again because if you’re doing everything, one of the things that you tend to lose focus on is that initial generating leads or advertising, which feeds the whole thing. So I think that’s where a lot of people struggle. They’re not spending enough time there.
Or in their mind, “That’s not where I make my money,” but you never have a chance to make money unless you’re putting effective on generating leads and opportunities to even make offers. I think when you start to put these metrics . . . maybe we can talk about scorecard a little bit, of what’s typical. There are some obvious things that we talked about, leads and number of appointments to make offers and things like that. Maybe you can talk about a typical scorecard.
Frank: What a like to do is I look at what is the whole process. So what’s the main thing you do? So in real estate, let’s say we flip houses. So we flip houses. Our business model is we find properties from motivated sellers so we’re not dealing with REO so that’s what we do. So we need to have leads coming in from motivated sellers.
We make offers on homes. We take down the home. But before we take it down, let’s say in this model, we flip the contract, not the home. We’re not actually going to close on the buy. We’re going to sell the contract off and then we’re going to close out. So we’ll use that as an example. I realize there are a lot of ways to do this.
So on the marketing side, motivated leads, motivated seller leads are going to be important. So I have to have a certain number of those coming in every week if my model is a continuous model. I’m looking for one number there. Why am I looking for one number? That’s the one that sort of kicks things off. I could look at number of channels that I’m marketing to. Does that matter? Does it really matter? What you need, here’s what it is, the acquisition, what do they need from marketing? They need motivated sellers that they can call. That’s what they need.
So that’s the most important thing as a lead coming out of marketing getting to your acquisition team. What does your acquisition team need to do? They need to be writing offers, right? What do they need before they write an offer? They have to have appointments.
What do they need before that? They need motivated seller leads. That’s what they need on inbound, which we call viable leads. So for them, I’m more interested in appointments because that is a qualified lead. Why is it qualified? Because they took the call. So they’ve already established that, “I’m interested in hearing what you have to say. I actually have something I want to sell.” So the acquisitions team has what we like to call a very variable opportunity to buy something or put a contract on something.
What do my sales team need? My sales teams need contracts from acquisitions. They can’t go and sell off to the buyers anything if they don’t have a contract. There’s nothing for them to do. What do they also need? They need buyer leads. So they have to go back to marketing. There’s a reliance there.
So motivated seller leads and willing buyer leads–call them what you will, viable buying leads. So marketing has two roles they have to do and two numbers because both of them support this. I can’t sell to a buyer if I don’t have a buyer’s list. I can always go back to my existing list. But also need new ones coming in all the time because we know that some of the leads we have are stale.
So with that being said, that little model we just talked about from a scorecard, four numbers: buyer leads, seller leads, number of appointments for acquisition. Over here, it’s number of buyer appointments, which means they would have had a contract already. They can’t even do an appointment with a buyer to go negotiate this if there’s nothing there.
So it’s appointment, appointment, lead, lead. Those two things there are going to lead you on a weekly basis with the activity of the business. Now, when you know your conversion . . . so how does it actually work when it all comes together? We get leads. Acquisitions team writes offers and gets accepted offers. The sales team takes those accepted offers, finds willing buyers. They exchange the contract for cash, done deal. That’s how we make money.
Mike: Frank, in your experience with real estate investors, a lot of people have a little bit different business models. Some people focus on foreclosures and networking and other things like that. So you could be doing both fundamental marketing, advertising to generate leads. And then you have leads appointments and all these things.
You could also say, “My acquisitions person is responsible for networking or going to REIA clubs or meeting with other wholesalers or whatever and I want them to meet with five people a week or whatever. Does it make sense to have a scorecard that tracks those things as well?
Frank: Absolutely. So there’s a difference between what we call a leadership scorecard and a departmental scorecard. They both exist. The leadership scorecard is what information do I need to know to determine the health of my company. The department one says, “What information do I need to know to determine the effectiveness of the seat that people sit in? So if I have somebody in acquisitions, for example, as you just said, it’s not going to behoove them if they’re not out there at certain meetings.
And honestly, let’s look at your sales team. They’re looking for wholesale buyers, if you’re not out at REIA clubs and you’re not networking with people at least twice a week or at some frequency . . . So I might have number of meetings attended or numbers of meetings that we’ve been represented at as a company. Then I might have, if I’m the leader of your sales team, I want to know a number that each person went on because I’m going to hold them accountable for that.
So if I’ve got two people on my team and I want two for each time, departmentally, I want them to go to four, but at the leadership level, all I need to know is how many appointments did they attend collectively? You, as a leader of that department, you’re going to deal with the department people and I’m going to trust that you’re going do a great job as an integrator innovator, visionary-type leader.
If you don’t have four appointments, we’re going to have a conversation about that or however many appointments you needed. We’re going to have a conversation about that. What happened? Why didn’t we get there? You would already know because you’re managing your department. Does that make sense?
Mike: Yeah. Hopefully, people that are listening to this, hopefully, there are some things that are making sense here. It’s hard to hold people accountable for things if they don’t know how they’re being measured.
A lot of those things, it’s hard to measure, “I went to a REIA club and, therefore, I sold a house for more than I normally would.” It’s really difficult to measure that. So you could say, “How come we’re not getting as much for houses as we should?” But you have no clear way to say, ‘Well, if we were continually building our buyer’s list, we might have a broader array of people we could sell to, some of which might be willing to pay more,”
So I think it’s really important. I’ve gotten into this situation before where I’m so high-level that people on my team don’t really know how they’re being measured. I can’t measure them because I haven’t kind of laid down, “This is your scorecard.”
Frank: One of the reasons why owner/operators tend to be so on top of their people and breathing down their neck all the time is they don’t have any numbers that represent how they’re doing so they feel they need to because they’re paying them money. It’s like, “I’m paying them money. They’ve got to deliver.” Well, what are they delivering? What are you monitoring? What are you measuring?
The other thing about accountability and having a number, every person on the team has a number, one of the things that, to me, is one of the most powerful things is people love to compete with themselves. If you want me to have two meetings a week, I’m going to do three. I am going to overachieve. I think there’s a huge misnomer out there that people are generally lazy. I don’t believe that for a minute. I think that when people get a job with you, their intention is to do good and to do better than good.
Here’s what ultimately starts to happen. They don’t get clarity on what they need to do for you. So the first time they get their butt chewed out for not doing something and you didn’t provide them with the process on how to do it or you didn’t provide them with the tools and the resources to help them clearly understand what your expectation was, you start chipping away at this relationship. When you first meet, it’s all hunky dory. It’s that little honeymoon period. You’re allowing them to make a few mistakes. They’re not giving you everything you need, but you know it’s coming.
And then, little by little, you realize it’s not coming. Little by little, you realize they’re not performing. It’s not that they don’t want to, it’s that we as leaders have failed them because we haven’t given them everything that we told them we would or that we should as a business owner. The first thing I teach every leadership team: own 100% of all the mistakes in the company and you will free yourself from the mindset of getting stuck.
Mike: Yeah. It’s interesting. This is really hitting home with me, Frank, just on some recent things in my business for sure. I was out for two weeks and things aren’t getting done. I’ve kind of realized the same thing. I’m not being a good enough leader.
Frank: The first question I tell all my leadership teams to do is ask this question, “How have I failed this person? What did I not provide them? Did I not provide them with the training? Did I not provide them with the process? Did I not provide them with the resources they need to do whatever it is I ask them to do?
Even if somebody stole from me, came in and emptied out my bank account, how did I feel? How did I own that? Well, I hired him. How did I get him through the hiring process? Where do I need to fix my hiring process? I obviously didn’t catch what I needed to catch.
Now, the reality in life is not everything is 100% your fault. But if you behave like it is, you will make great decisions on behalf of your company. Even when somebody does things that are chipping away at you, it won’t matter to you. You won’t look at it that way. You’ll look at, “How did I fail them? How did I fail the company? What did I not do to protect this house?” if you will.
Mike: Awesome. Frank, is there anything else that we want to cover here in the taking action segment?
Frank: The biggest thing is when they build that accountability chart. My best advice to you guys, is first and foremost, read the book “Traction.” It will be so eye opening for many of you. For those of you that have already read it, my question for you is why aren’t you doing anything about it if you’re not. You really should be. At a minimum, just follow what they tell you to do. Just follow along with what they tell you to do. It’s not complicated.
Now, there are a lot of places you can get stuck, but you can always go back to the chapters and sort of get through it. Even if you get stuck through doing the tools they provide to any entrepreneur or anyone reading the book, it’s better than what most people are running themselves anyway. So whether you hire a guy like me to come in and do something like that for you . . . it’s not required. They give you enough information that you will be better if you do it. Will you be perfect? No. Perfect is utopia.
Mike: Yeah. That’s one of those things where I know you’re big on creating an operating manual for your company or those things. That just happened to me, literally. We were together a couple of weeks ago at some meetings and EOS kept coming up and on the plane ride home, I read it again. I didn’t read the entire book, but I read portions of it because I read it previously. It was almost like . . .
I’ve got a lot of room for improvement. I’m not trying to say, “Hey, I’m the poster child for how to effectively run your business here.” Which is why I always love talking to you because it’s almost like maintenance. It’s like you need to kind of reference that book or your operating manual or whatever you have, whether it’s monthly or quarterly or whatever. We do maintenance on our vehicles and our homes, all these other things . . .
Frank: And our bodies.
Mike: We don’t even do it on our business.
Frank: We’ve got to maintain our bodies, right? Everything in life requires maintenance. Your business is like a living, breathing organism. It constantly requires input from you, guidance from you, structure from you and it requires you to back off and let people do what their part is too. A lot of time, it’s really hard to do as the owner of it because you really feel like nobody’s going to do it like you are. As long as all the information is in your head, you’re right. They never will if you can’t get it out of here and onto paper to help them do it the way you would do it.
Mike: Yeah. Awesome. Once, again, we’ll add a link for “Traction” down below. I will tell you his–the first time I bought “Traction,” I bought the wrong book. There’s another book called “Traction.” Make sure it’s the one written by Gino Wickman and it’s talking about the EOS system. Frank, I know you’re a consultant and you do this for a lot of other people. If they wanted to learn more about you, I know you have a lot of information on your site as well, where can they go to learn more?
Frank: They can go right to TheSmartGuides.com.
Mike: TheSmartGuides.com. So we’ll add a link down below for that as well. If anybody’s interested in talking to Frank, I know Frank personally. We’ve had several conversations. He’s a really good guy and always very helpful too. Frank, I definitely appreciate you sharing this information today. It’s really great and hopefully, a lot of people are listening to this and realizing that they nee to take action here and kind of help them take their business to the next level by just getting their systems and operations and accountability more buttoned up.
Frank: That’s right. Just remember–the decision they make, whether they choose to do it or not do it, that’s fine. Just decide. Just don’t leave it hanging there because a no decision is also a decision.
Mike: Absolutely.
Frank: A little mindset tip.
Mike: Awesome, Frank. Have a great day. We’ll look forward to talking to you again sometime soon.
Frank: Thanks, Mike.
Mike: All right.
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